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Tag: KT&G

  • KT&G Rumored to be Entering Nicotine Pouch Market

    KT&G Rumored to be Entering Nicotine Pouch Market

    KT&G Corp. is in talks to acquire a leading nicotine pouch company in Northern Europe for $200 million, according to The Korea Economic Daily. The belief is that South Korea’s dominant tobacco and ginseng producer is exploring new growth drivers amid tightening regulations and a shrinking traditional cigarette market, investment banking sources said this week.

    If completed, the deal would mark KT&G’s first overseas M&A since it acquired a 60% stake in Indonesian tobacco maker Trisakti Purwosari Makmur in 2011 for about $90 million, the newspaper said.
    According to reports, Flashlight Capital Partners, KT&G’s activist investor, urged the company to emulate global peers such as Philip Morris and accelerate its entry into new segments. PMI got into the nicotine pouch market in 2022 when it purchased Swedish Match, the maker of Zyn, for $16 billion. KT&G declined to comment on the acquisition talks, saying no decision has been finalized.

  • Esse Cigarettes Power KT&G’s Global Push

    Esse Cigarettes Power KT&G’s Global Push

    KT&G’s ultra-slim cigarette brand, Esse, continues to enjoy strong and steady demand in the Middle East and Central Asia — emerging as one of South Korea’s fastest-growing processed food exports in the first quarter of this year, according to the company.

    According to data released by the Ministry of Agriculture, KT&G’s cigarette exports rose 14.5% year-on-year during the January–March period, ranking second in export growth behind ramyeon, which saw a 27.3% increase.

    “In the Gulf Cooperation Council (GCC) region, including the UAE, the Korean Wave has played a major role in boosting interest in slim cigarettes made in Korea,” said an official from the Agriculture Ministry. “At the same time, exports to Commonwealth of Independent States (CIS) countries, such as Russia and Mongolia, have also grown, fueling further momentum.”

    KT&G’s cigarette exports to GCC countries reached $49 million in the first quarter, marking an 83.6 percent year-on-year increase. Exports to CIS nations more than doubled to $29 million over the same period. Among these markets, Mongolia stood out, where KT&G’s localization strategies have helped the company capture a market-leading share of over 50%, the company said.

    Last year, KT&G posted 1.45 trillion won ($986 million) in overseas sales, up 28% from the previous year, driven largely by strong cigarette demand. Its cigarette exports alone reached 58.6 billion won ($39.9 million).

    Indonesia remains KT&G’s largest export destination, while Central Asian countries such as Uzbekistan are rapidly emerging as key growth markets. KT&G sold 270 million cigarettes in Uzbekistan last year, ahead of launching a local office there in January. The company has also secured the top market share in Tajikistan and third place in Kazakhstan.

    To meet growing global demand, KT&G is building new manufacturing facilities in Kazakhstan and Indonesia, set to be completed by 2026.  

  • KT&G Opens Expanded Plant in Turkiye

    KT&G Opens Expanded Plant in Turkiye

    South Korea’s leading tobacco company, KT&G, announced the completion of additional manufacturing facilities in Turkiye as part of a strategy to solidify its position as a global top-tier company. This is part of the company’s 2023 initiative to increase global sales by 50%.

    The expansion in Turkiye added two new production facilities to the factory, increasing its total ground area by approximately 50% to 25,000 square meters. With the upgrades, the company’s four facilities can now produce up to 12 billion cigarettes annually, enabling KT&G to meet growing demand in North Africa and Latin America.

    “By strengthening our production capabilities in Turkiye, we are taking significant steps toward becoming an unmatched global leader,” KT&G’s CEO Bang Kyung-man said in a statement. “We will continue to focus on our three core businesses while enhancing our competitive edge.”

    KT&G has been expanding its global footprint since establishing its first overseas factory in Turkiye in 2008. The company is currently working on additional projects, including new factories in Indonesia and a facility in Kazakhstan, set to be completed this year.

  • KT&G Announces New Uzbekistan Subsidiary

    KT&G Announces New Uzbekistan Subsidiary

    South Korea’s leading tobacco manufacturer, KT&G, has established a new subsidiary in Uzbekistan to strengthen its international market presence. This strategic move follows the opening of a local office in 2023, aimed at exporting customized tobacco products under the Esse brand to cater to regional preferences.

    In the previous year, KT&G achieved significant sales milestones, distributing 270 billion cigarettes across 120 countries. This expansion into Uzbekistan is part of the company’s broader strategy to tap into emerging markets and diversify its global portfolio.

    The establishment of the Uzbekistan subsidiary underscores KT&G’s commitment to adapting its product offerings to meet local tastes and regulatory environments. By focusing on customized products, the company aims to enhance its competitiveness and brand recognition in the Central Asian region.

  • KT&G Builds Factory in Kazakhstan

    KT&G Builds Factory in Kazakhstan

    Image: KT&G

    KT&G is building a new factory in Kazakhstan to meet global demand for its overseas business.

    In October 2023, KT&G held a groundbreaking ceremony for the new plant in Almaty and began building a “hybrid production base” for overseas sales on a site of about 200,000 square meters. When the plant is completed in 2025, Kazakhstan will become a production hub for supplying products to Europe, the CIS and the rest of Eurasia.

    In early 2023, KT&G established a sales and manufacturing subsidiary in Kazakhstan to grow its business in Eurasia and has been focusing on establishing a local business foundation. Currently, the company employs more than 150 locally recruited employees, and the completion of the plant is expected to create additional local employment as it establishes a complete local value chain from production to marketing and sales.

    The establishment of KT&G’s new factory in Kazakhstan is part of a growth investment aimed at achieving the company’s vision of becoming a “global top-tier” player. KT&G has announced its goal to increase the proportion of sales from overseas business to more than 50 percent of its total revenue by 2027 through future growth investments.

    As of the third quarter, KT&G’s overseas cigarette sales amounted to 163.2 million pieces, the largest sales volume of the company for the second consecutive quarter.

  • KT&G Rejects Offer for Ginseng Business

    KT&G Rejects Offer for Ginseng Business

    Image: Photobeps

    KT&G rejected an offer by Flashlight Capital Services (FCP) to purchase its ginseng business, reports Business Korea.

    On Nov. 8, KT&G sent a response to FCP’s letter of intent. “We will do our best to foster the three core businesses, including health functional foods,” it stated.

    “Last year, we announced a mid-to-long-term growth strategy to foster health functional foods along with overseas cigarettes and NGP [next-generation products] as our three core businesses, and we will do our best to achieve these goals,” a KT&G official emphasized.

    On Oct. 14, KT&G also issued a statement dismissing FCP’s acquisition proposal, stating, “FCP’s acquisition proposal was unilaterally disclosed without any discussion with us.”

    In its letter of intent, FCP offered to acquire all KGC’s shares for nearly KRW2 trillion ($1.47 billion), which represents a 50 percent premium over the enterprise value mentioned by some analysts during KT&G’s 2023 investor day.

    Industry insiders believe the likelihood of the transaction being completed is low, given KT&G’s shareholding structure.

  • KT&G Reports Results and Presents Growth Plan

    KT&G Reports Results and Presents Growth Plan

    Image: KT&G

    KT&G reported consolidated revenue for the third quarter of KRW1.64 trillion and operating profit KRW415.7 billion, up 2.2 percent year-on-year.

    The growth trend centered on the main business continued in the third quarter. Revenue of the three companies core growth businesses—overseas cigarettes, next generation products (NGP) and health-functional foods exceeded KRW1 trillion, achieving the highest-ever quarterly revenue, while the revenue of the tobacco business also reached a record high.

    Revenue in the tobacco business reached KRW1.048 trillion, up 7.7 percent from the same period last year, while operating profit grew 23.6 percent to KRW333 billion, outpacing the revenue increase.

    In the tobacco business, growth was particularly strong in overseas cigarettes. In the third quarter, revenue of the overseas cigarette business reached KRW419.7 billion, up 30.5 percent year-over-year, setting a new record in revenue for two consecutive quarters, while sales volume and operating profit also increased by 10.1 percent and 167.2 percent, respectively, achieving growth trifecta in sales volume, revenue and operating profit.

    While reporting its financial results, KT&G also announced a plan to achieve 15 percent return on equity (ROE) by 2027, to increase cash returns and to repurchase and cancel shares.

    Since the appointment of CEO Kyung Man Bang in March, KT&G has been working to increase its competitiveness and upgrade the group’s financial structure. In particular, the company has been prioritizing the group’s ROE enhancement project, which is based on profitability improvement, asset efficiency and financial optimization.

    Under the new corporate value-up plan, shareholder return will also be expanded in 2024. KT&G’s board of directors resolved to repurchase 1.35 million shares with KRW150 billion of the financial resources secured through the securitization of non-core and low-yield assets and to cancel them in full within the year.

    “We are in full swing in creating results by strengthening our business structure centered on our core business and upgrading our financial structure to become a ‘global top-tier’ company,” KT&G wrote in a press note. “We will continue to focus our resources and capabilities on our three core businesses to strengthen our intrinsic competitiveness and return the fruits of our achievements to our shareholders to achieve true value-up where corporate value and shareholder value grow together.”

  • KT&G Remains Committed to Ginseng Business

    KT&G Remains Committed to Ginseng Business

    Photo: KT&G

    The Ginseng business remains a key part of KT&G’s plan for growth, the South Korean cigarette manufacturer said after receiving a bid for its Korea Ginseng Corp. (KGC) unit.

    On Oct. 13, Singapore-based activist fund Flashlight Capital Partners offered nearly KRW2 trillion ($1.47 billion) for KGC, which is 50 percent higher than the enterprise value analyst estimates mentioned at KT&G’s 2023 investor day.

    Flashlight Capital Partners believes that KT&G significantly undervalues its ginseng business and that the ginseng-tobacco pairing does not work.

    According to The Korea Herald, KT&G called Flashlight’s bid a “unilateral” offer. “The acquisition offer was unilaterally released without any discussion with the company,” KT&G wrote in a statement on Oct. 14. “We will look into the letter of intent sufficiently.”

    In the announcement, however, KT&G also stressed that KGC is a key part of its plan to nurture future growth drivers. It said it will put in all efforts to achieve the goals set under a mid-term business plan released last year.

    The plan, announced in January 2023, involves bolstering its investment and sales in three key areas: next-generation nicotine products, overseas businesses and KGC health supplement products.

    The activist fund has been pressuring KT&G to spin off its ginseng unit since 2022, citing low performance and undervaluation. KT&G’s board has argued that a spinoff may lead to a loss of synergy for both KT&G and KGC.

  • Flashlight Offers to Buy KT&G’s Ginseng Business

    Flashlight Offers to Buy KT&G’s Ginseng Business

    Photo: Fan Chen

    Flashlight Capital Partners (FCP) wants to purchase KT&G Corp.’s Ginseng business. The activist investor, which is also a shareholder in KT&G, has submitted a letter of intent to acquire all shares of KT&G subsidiary Korea Ginseng Corp. (KGC).

    FCP is offering KRW1.9 trillion ($1.4 billion), which is 50 percent higher than the enterprise value analyst estimates mentioned at KT&G’s 2023 investor day.

    FCP believes that figure significantly undervalues the business. “It’s like watching parents who downplay their own child,” said FCP Managing Partner Sanghyun Lee in a statement. “We see immense potential in the poor kid. We aim to develop Korea ginseng into a global brand, comparable to Manuka honey or Maotai.”

    Despite the growing demand for health food, KGC’s operating profit halved from KRW202.1 billion in 2019 to KRW103.1 billion in 2023, and KT&G’s guidance indicates further decline in 2024.

    FCP has argued that the tobacco-ginseng pairing was a “wrong marriage,” and that KGC’s value is not reflected in KT&G’s stock price at all. Since 2022, FCP has advocated for a horizontal spinoff of KGC, but KT&G’s board rejected the proposal in 2023.

    Lee compared KT&G’s stance on KGC as “Not good enough for me, but too good for others.” He emphasized the need for either a spinoff or sale of KGC and warned that “If KT&G’s board opposes our proposal without a proper rationale, it will only prove that they are serving the interests of management rather than those of the shareholders.”

    Headquartered in Singapore, FCP has repeatedly pushed for changes at KT&G. In recent years, it has pushed for a greater emphasis on smoking alternatives, more transparent procedures in filling the company’s leadership, and a new CEO pay structure.

  • KT&G Steps up Investment in Indonesia

    KT&G Steps up Investment in Indonesia

    Photo: KT&G

    KT&G will invest KRW600 billion ($454 million) and hire about 1,000 people in Indonesia. The company’s local operations will serve not only Indonesia but also the Middle East and other markets in the Asia-Pacific region.

    “KT&G chose Indonesia as the company’s center of production for the Asia-Pacific market,” KT&G Indonesia’s president director, Jeong Yun-sig, told JoongAng Daily. Indonesia is KT&G’s biggest market outside Korea, accounting for 22.6 percent of the tobacco company’s total exports as of 2023.

    KT&G entered Indonesia in 2011, when it bought a local tobacco company. As of 2023, the company had sold 9.55 billion cigarettes in the country, propelling it to the No. 4 spot among tobacco manufacturers in Indonesia, ahead of multinationals such as British American Tobacco and Japan Tobacco International.

     In April, KT&G broke ground for two additional Indonesian factories. Upon completion, company will have a production capacity in Indonesia of 35 billion cigarettes annually.

     “We have consistently invested in the Indonesian market, building a local R&D center and hiring experts for localization efforts,” Jeong Yun-sig said. “The localized version of Esse and new brands for the Indonesian market worked well for the company.”